It has been reported that an umbrella company has been ordered to pay back incorrectly claimed tax relief of some £11m to HMRC.
According to the report the umbrella company, Exchequer Solutions Limited, believing that expenses were not taxable, had paid expenses to its workers without deducting PAYE and NICs. The First Tier Tribunal decided that the workers were not employed on overarching employment contracts and thus the expenses were taxable. An overarching employment contract is one where the worker remains employed by the umbrella company in periods when not deployed to a hirer on a supply contract.
This decision is based upon specific facts and arrangements, so does not apply to all umbrella providers, many of whom address the overarching nature in different ways, nor does the decision involve tax debts being transferred to agencies as in this case payments have been treated as employment income. However, it demonstrates again HMRC’s determination to pursue unpaid levels of tax in the umbrella sector and follows HMRC’s recently published decision to pursue contractors under the managed service company rules to the tune of £50m. Regardless of whether Exchequer appeals the decision, fallout in the chain of supply is perhaps inevitable.
To find out more about risk and liability in this challenged sector come to this Lawspeed seminar on 14th July, where Lawspeed experts will review worker and contractor ‘umbrella’ tax issues in conjunction with HMRC and BEIS representatives.
Adrian, a highly experienced lawyer, founded Lawspeed in 1997. He is responsible for developing our extensive portfolio of products and services, including the widely used Lawspeed contract templates. Adrian is an expert on “recruitment law” and specialises in contracts, regulatory compliance, employment status and dispute handling. He is chair of the trade body the Association of Recruitment Consultancies, the only lawyer lead recruitment trade body in the UK. Adrian and his co-director Ravi devised Standards in Recruitment as a vehicle for helping drive up standards and compliance in the industry.
Adrian is our lead in discussions with the government over regulatory evolution. Apart from assisting with client support, Adrian’s primary role is research and development into methods of business delivery, our latest service Proterms being his most recent project. Adrian heads our IR35 lawyers team.